Approximately $1.4 billion of asset-backed securities affected
New York, February 04, 2011 -- Moody's reviews for possible downgrade 52 certificates in Lehman's
small balance commercial real estate deals
Approximately $1.4 billion of asset-backed securities
affected
Moody's Investors Service has placed on review for possible downgrade
48 tranches issued in six securitizations of small business loans and
four tranches issued in three net interest margin securities transactions.
The deals are serviced by Aurora Bank FSB, formerly known as Lehman
Brothers Bank, FSB. The loans are secured primarily by commercial
real estate.
RATINGS RATIONALE
The rating actions are due to a significant rise in 60 days or more delinquencies,
including amounts in foreclosure and REO, from a range of 10%-13%
of the current pool balance in February 2009 to 20%-25%
as of the January 2011 distribution date. The 2005-1 deal
experienced an increase in 60 days or more delinquencies from 4%
to 8% of the current pool balance.
The methodology used in these rating actions included an analysis of the
loan collateral to arrive at a range of estimated lifetime losses.
This range of net losses was then evaluated against the available credit
enhancement provided by the reserve account, overcollateralization,
and excess spread. Sufficiency of coverage was considered in light
of the credit quality of the collateral pool, industry, geographical
and loan concentrations, historical variability of losses experienced
by the issuer, and servicer quality.
The methodology used for the net interest margin securities included evaluating
the likelihood of paying interest and principal from excess cash and prepayment
fees from the respective underlying small business loan transaction.
The potential cash inflow was considered in relation to accumulated interest
shortfalls and reserve account deficits.
During the review period, we will project expected defaults on the
underlying pools of loans using delinquency roll rates and an estimate
of market recoveries. The Aaa volatility proxies will also be determined.
Driving factors of the Aaa volatility proxy for each deal are the credit
quality of the collateral pool, the historical variability in losses
experienced by the issuer, the servicer quality as well as the industrial,
geographical and obligor concentrations.
Based on our revised expected losses and Aaa volatility proxies,
Moody's will evaluate whether the available credit enhancement adequately
protects investors against future collateral losses for given rating assignments.
Primary sources of assumption uncertainty are the general economic environment,
commercial property values, and the ability of small businesses
to recover from the recession.
Other methodologies and factors that may have been considered in the process
of rating these transactions can also be found on Moody's website.
Further information on Moody's analysis of this transaction is available
on www.moodys.com. In addition, Moody's publishes
a weekly summary of structured finance credit, ratings and methodologies,
available to all registered users of our website, at www.moodys.com/SFQuickCheck.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The complete rating actions are as follows:
Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through
Certificates, Series 2005-1
Cl. A, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. A-IO, Aa1 (sf) Placed Under Review for Possible
Downgrade; previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. M1, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa2 (sf)
Cl. M2, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B1 (sf)
Cl. B, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B3 (sf)
Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through
Certificates, Series 2006-2
Cl. 1A, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. M1, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa1 (sf)
Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa3 (sf)
Cl. M3, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba3 (sf)
Cl. B, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B2 (sf)
Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through
Certficates, Series 2006-3
Cl. 1A, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. M1, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa1 (sf)
Cl. M2, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba1 (sf)
Cl. M3, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B1 (sf)
Cl. B, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B2 (sf)
Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through
Certificates, Series 2007-1
Cl. 1A, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A1, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. M1, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa1 (sf)
Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa3 (sf)
Cl. M3, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba3 (sf)
Cl. M4, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B1 (sf)
Cl. B, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B2 (sf)
Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through
Certificates, Series 2007-2
Cl. 1A2, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 1A3, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 1A4, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A1, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. M1, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to A3 (sf)
Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa3 (sf)
Cl. M3, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba1 (sf)
Cl. M4, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba3 (sf)
Cl. M5, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B1 (sf)
Cl. B, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B2 (sf)
Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through
Certificates, Series 2007-3
Cl. AM, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. AJ, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Aa1 (sf)
Cl. M1, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to A3 (sf)
Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Baa3 (sf)
Cl. M3, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba2 (sf)
Cl. M4, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to Ba3 (sf)
Cl. M5, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B1 (sf)
Cl. B, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 4, 2009 Downgraded to B2 (sf)
Issuer: LBSBC Net Interest Margin Securities, Series 2005-2
Cl. N2, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 18, 2009 Downgraded to Caa3 (sf)
Issuer: LBSBC Net Interest Margin Notes, Series 2006-1
Cl. N1, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 18, 2009 Downgraded to Ba1 (sf)
Cl. N2, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Mar 18, 2009 Downgraded to Ca (sf)
Issuer: LBSBC Net Interest Margin Securities, Series 2006-2
Cl. N1, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Mar 18, 2009 Downgraded to Ca (sf)
New York
Irina Faynzilberg
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Katherine Lew
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews for possible downgrade 52 certificates in Lehman's small balance commercial real estate deals